A press has a dieset that has an estimated life of 500000 un

A press has a die-set that has an estimated life of 500,000 units. It has a first cost of $50,000 and a salvage amount of $3000. If 60,000 units are produced in a year, determine the annual depreciation expense of the die.

Solution

Usage based depreciation:

Depreciation per unit = (Cost - salvage value)/estimated units output

Depreciation per unit = 47000/500000 = $ 0.094 per unit

Depreciation expense = Depreciation per unit x No. of units produced/yr = 60000 x 0.094 = $5640